The federal government needs to make economic sovereignty its No. 1 priority to ensure the $585 million in spending in Budget 2025 benefits Canadian-headquartered companies, not foreign firms, says the Council of Canadian Innovators (CCI).

Government needs a “serious conversation” about economic sovereignty, as well as a clear and legislated definition of a Canadian technology company, CCI executives said in an online budget debrief.

“Canada still lacks that clear definition of what constitutes a sovereign Canadian company,” said Daniel Perry (photo at right), the CCI’s director of federal affairs.

“Without a foundation of clarity, we risk deploying these investments we see in this budget in the same status quo ways, and funding growth that ultimately benefits foreign interests rather than building an enduring Canadian economic power,” he said.

“It is essential for Prime Minister Carney and his team to work closely with CEOs and industry leaders to shape program, policy and procurement strategies that will drive success for Canadian-headquartered companies across Canada,” Perry said.

Benjamin Bergen (photo at left), president of the CCI, said Budget 2025 is “dramatically different” from last year’s federal budget.

The word “investment” is mentioned more than 800 times in Budget 2025, “productivity” shows up more than 150 times, and “sovereignty” over 80 times, he said.

“What we have here [with Budget 2025] is a document that is beginning to articulate that the government understands the issues and challenges that we as a country are in,” Bergen said.

Budget 2025 includes total spending of approximately $585 billion, including about $90 billion over five years in new measures. According to the budget, $60 billion will be saved in government savings and operating reductions.

Perry said Budget 2025 reflects a shift from broad program expansion and toward strategic national investments, defence, innovation, infrastructure, productivity. “The government is choosing to reallocate and modernize, not simply spend more.”

When it comes to delivering the funding allocated in the budget, “We need to make sure that Canadian companies are front-of-mind for this government,” Perry said.

The CCI executives welcomed the reforms in the budget to the Scientific Research and Experimental Development (SR&ED) tax credit program.

Perry said the key change is that the enhanced 35-percent refundable tax credit is now available to companies on the first $6 million of eligible spending – up from $3 million.

This effectively doubles the liquidity available through SR&ED for qualifying Canadian-controlled private corporations – and for the first time, newly eligible Canadian public companies as well, Perry said.

All the SR&ED changes apply to taxation years that begin on or after Dec. 16, 2024, the date of the Fall Economic Statement.

Another SR&ED change is that the Canada Revenue Agency (CRA) will introduce pre-claim approval processes. The CRA also is targeting 90-day processing times, down from 180 days, and will use AI tools to reduce review burden and accelerate low-risk filings.

“We want to ensure that Canadian-owned firms are prioritized [for SR&ED], guarding against foreign subsidiaries absorbing these benefits,” Perry said.

The government’s changes to the SR&ED program also impressed Logan Hanson, co-founder of SRED.ca and a 20-year SR&ED specialist helping innovators maximize SR&ED credits.

“After nearly two decades with little change, the SR&ED program is finally catching up to reality,” Logan said.

For years, inflation and the rising cost of doing business left the old thresholds for claiming SR&ED tax credits “far behind where they needed to be,” he said. “This update is a long-overdue modernization – an evolution that aligns the program with the realities of how innovation happens today.”

Manufacturers, in particular, are finally being recognized for doing exactly what SR&ED was meant to encourage: investing in innovation and productivity, Logan said.

Also, by extending refundable credits to smaller public companies, the government is acknowledging how modern R&D is actually financed, he added.

Budget supports “Buy Canadian” strategy, procurement and tech adoption

Budget 2025 also included $1 billion for the federal Venture Capital Catalyst Initiative and committed to another $750 million to build a new growth-stage capital strategy beginning in 2026.

There was also funding to implement the “Buy Canadian” strategy in federal departments and a new program to support small and medium-sized businesses and innovation procurement.

The budget also proposed the creation of a new Office of Digital Transformation to steer technology adoption by government.

Budget 2025 allocated $925.6 million for sovereign AI compute infrastructure. In addition, the Canada Infrastructure Bank is now authorized to invest directly in AI and cloud infrastructure.

Laurent Carbonneau (photo at right), the CCI’s director of policy & research, pointed out that $125 million of the $925.6 million is new money, while the rest is being repurposed from what was left of the $2.4 billion for AI adoption and sovereign AI compute infrastructure announced a couple of years ago

Canada’s AI strategy should include a sovereign compute capacity for the government’s high-sensitivity needs, such as for defence and intelligence, Carbonneau said.

The AI strategy needs to be less focused on academic research on AI or doubling down on AI models, and more focused on where Canada can succeed in AI applications, he said. This includes making available proprietary, high-quality datasets “that are going to be a difference-maker in that field.”
One of the largest allocations in Budget 2025 is $81.8 billion over five years for defense and national security.

“This is a massive investment in Canada’s security and industrial base,” Perry noted.

The government is signalling that spending on defence and national security is an economic strategy to help grow domestic firms, strengthen Canadian supply chains, and anchor Canadian-controlled capacity here in Canada, he said.

“What matters here is execution. We need to ensure that Canadian companies are at the forefront of this,” Perry said.

Budget 2025 allocated $68.2 million to establish the Bureau of Research, Engineering and Advanced Leadership, a partnership for building sovereign AI and quantum tools for defence.

The budget also committed $1 billion to the Business Development Bank of Canada – which is devoted to Canadian entrepreneurs –  for spending on defence.

These are signals that the federal government expects a Canadian defence tech ecosystem to grow, Perry said. “This is a clear industrial capacity move.”

However, the industrial capacity in defence “must be Canadian. The goal is not for R&D to leave the country, but stays here in Canada,” he said.

Perry said the potential risks as the government delivers on Budget 2025 include:

• Procurement policy that’s diluted during departmental implementation.
• SR&ED benefits captured by foreign subsidies and consulting chains.
• Sovereign compute funding flowing mostly to foreign hyper-scalers.
• Defence spending defaulting to foreign nationals instead of supporting the ecosystem here in Canada.

The CCI’s next steps are to “push for disciplined execution and sovereignty standards to ensure they support our domestic innovation,” Perry said.

This includes pushing for measurable contracting targets for Canadian firms, ensuring procurement policy language prioritizes Canadian-headquartered companies, and prioritizing Canadian AI, cloud, cybersecurity and dual-use technology adoption.

Budget includes funding to attract talent and for health initiatives

Carbonneau pointed out that Budget 2025’s focus on promoting private sector investment has mostly to do with building new physical assets such as infrastructure.

While this is welcome, “from CCI’s point of view, what’s going to build prosperity in Canada is more scaling, more firms that are building off of their intangible assets,” he said. “That’s where perhaps we might want to see more vision in the future.”

Canada needs to shift to a sovereign economic strategy that recognizes the critical underlying importance of intangible assets, Carbonneau said.

Dana O’Born (photo at right), vice-president, strategy & advocacy at CCI, noted that Budget 2025 also allocated funding for health, including a new $5-billion Health Infrastructure Fund.

The Health Charities Coalition of Canada (HCCC) welcomed the budget’s investments in research talent (including a $1.7-billion International Talent Attraction Strategy), innovation infrastructure, and the life sciences sector.

“By championing research talent, we not only fuel scientific progress—we ensure that patients in Canada gain timely access to the innovations that can transform their lives,” said Laura Syron, chair of the HCCC’s board of directors and president and CEO of Diabetes Canada.

The HCCC also applauded the government’s recognition of the life sciences sector as a strategic driver of Canada’s economy.

With targeted support through the Venture Capital Catalyst Initiative, expanded SR&ED eligibility, and commitments to protect Canadian intellectual property, Budget 2025 positions life sciences as a key contributor to sustainable growth, high-value employment, and national resilience, the HCCC said.
“These investments are a clear signal that the government recognizes the foundational role of research and life sciences in building a healthier, more prosperous Canada,” said Connie Côté, CEO of HCCC.

Budget 2025 also is going in the right direction when it comes to immigration, the CCI’s Perry said. “The budget recalibrates immigration without abandoning skilled talent.”

For example, the government is:

• Holding permanent resident admissions at 380,000 annually.
• Increasing the share of “economic immigrants” to 64 percent.
• Reducing temporary resident intake over time.
• Providing funding for foreign credential recognition programs.
• Continuing immigration pathway support for people holding H-1B visas in the U.S.

The U15 Canada group of research universities welcomed the reintroduction of an exemption for international graduate students from study permit caps, announced as part of the 2026-28 Immigration Levels Plan.

“This sends a clear signal to the world’s best and brightest: you are welcome to study and advance your research ideas here in Canada,” U15 said.

The decision to exempt graduate students from permit caps “is an important step towards rebuilding Canada’s immigration system in a sustainable manner, focused on attracting top talent and leveraging our reputation as a global destination for excellence,” said Robert Asselin, CEO of U15 Canada.

The CCI’s Carbonneau noted that the 2024 federal budget “was the worst in memory for innovators,” with its increase in the capital gains tax inclusion rate – later cancelled by Mark Carney’s government.

In contrast, “the conversation has changed, the tone has changed, the focus has changed,” Carbonneau said. “I think we still have a way to go, but this [budget] is a promising step in the right direction.”

See also: “Budget 2025 aims to ‘catalyze’ private sector investment and includes ambitious talent recruitment strategy”

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